bank of america 1q18 financial results · – record net income of $6.9b and diluted earnings per...

Bank of America1Q18 Financial Results

April 16, 2018

(Comparisons to 1Q17)

• Earnings

– Record net income of $6.9B and diluted earnings per share of $0.62, up 30% and 38%, respectively

Effective tax rate benefited by 9 percentage points due to the Tax Act 1

– Pretax income of $8.4B, up 15%

– Total revenue of $23.1B grew 4% (net interest income +5% and noninterest income +3%)

– Noninterest expense of $13.9B declined 1%

13th straight quarter of positive YoY operating leverage

– Provision for credit losses remained low and stable

• Balances

– Average loans and leases in business segments grew 5%

– Average deposits increased more than 3%

– GWIM assets under management rose 15%

– Average assets in Global Markets up 12%

• Return Metrics and Efficiency

– Return on average common shareholders’ equity of 10.8%, up 276 bps

Return on average tangible common shareholders’ equity improved 382 bps to 15.3% 2

– Return on average assets increased 24 bps to 1.21%

– Efficiency ratio improved 325 bps to 60%

First Quarter 2018 Highlights

2

____________________Note: GWIM defined as Global Wealth & Investment Management.1 On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted, which included a lower U.S. corporate tax rate effective in 2018.2 Represents a non-GAAP financial measure. For important presentation information, see slide 25.

(7%)

(5%)

(2%)

1%

(3%)

1%3%

2%

7% 7%

1%

7%

4%

(29%)

(25%)

(31%)

(2%)

(10%)

(2%) (1%)

(4%)

(1%)

2%

(2%)(1%) (1%)

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18

YoY revenue growth (decline) YoY expense growth (decline) Operating leverage

Operating Leverage Trend

3

____________________Note: Amounts may not total due to rounding.1 Operating leverage calculated as the year-over-year percentage change in revenue, net of interest expense, less the percentage change in noninterest expense. Quarterly expense for 2017 and 2016 has

been restated to reflect the accounting change for retirement-eligible equity incentives adopted in 4Q17; 2015 and 2014 periods are as reported.2 Revenue growth and operating leverage adjusted to exclude the $0.9B noninterest income charge in 4Q17 from the Tax Act; represents a non-GAAP financial measure.

+22% +21% +29% +3% +8% +3% +5% +6% +8% +6% +3%

Positive YoY Operating Leverage for 13 Consecutive Quarters 1

+8% 2

2

Reported revenue growth of 2% and

operating leverage of 3%

+5%

Financial Results

4

____________________Note: Amounts may not total due to rounding. 1 Represents a non-GAAP financial measure. For important presentation information, see slide 25.

Total revenue, net of interest expense $23.1 $22.2 4 %

Noninterest expense 13.9 14.1 (1)

Provision for credit losses 0.8 0.8 –

Pretax income 8.4 7.3 15

Income tax expense 1.5 2.0 (26)

Net income 6.9 5.3 30

Diluted earnings per share $0.62 $0.45 38 %

Average diluted common shares (in millions) 10,473 10,920 (4)

Return Metrics and Efficiency

Return on average assets 1.21 % 0.97 % 24 bpsReturn on average common shareholders' equity 10.8 8.1 276

Return on average tangible common shareholders' equity 115.3 11.4 382

Efficiency ratio 60 63 (325)

1Q17

Summary Income Statement ($ in billions, except per share data)

% Inc / (Dec)

Inc / (Dec)

1Q171Q18

1Q18

Balance Sheet, Liquidity and Capital

5

$ in billions, except per share data

Balance Sheet (end of period balances)Total assets $2,328.5 $2,281.2 $2,247.8Total loans and leases 934.1 936.7 906.2Total loans and leases in business segments 1 869.5 867.3 823.0Total deposits 1,328.7 1,309.5 1,272.1

Funding & Liquidity Long-term debt $232.3 $227.4 $221.4Global Liquidity Sources (average) 2 522 522 507Liquidity coverage ratio 2, 3 124 % 125 % n/aTime to Required Funding (in months) 2 56 49 40

EquityCommon shareholders' equity $241.6 $244.8 $242.8Common equity ratio 10.4 % 10.7 % 10.8 %Tangible common shareholders' equity 4 $171.3 $174.5 $171.7Tangible common equity ratio 4 7.6 % 7.9 % 7.9 %

Per Share Data Book value per common share $23.74 $23.80 $24.34Tangible book value per common share 4 16.84 16.96 17.22Common shares outstanding (in billions) 5 10.18 10.29 9.97

1Q18 4Q17 1Q17 $ in billions

Basel 3 Capital 3

Common equity tier 1 capital (CET1) $164.8 $168.5 $164.3Standardized approach

Risk-weighted assets $1,452 $1,443 $1,416CET1 ratio 11.4 % 11.7 % 11.6 %

Advanced approachesRisk-weighted assets $1,458 $1,459 $1,498CET1 ratio 11.3 % 11.5 % 11.0 %

Supplementary leverage ratio (SLR) 2

Bank holding company SLR 6.8 % 6.9 % 7.0 %

1Q18 4Q17 1Q17

____________________1 Excludes loans and leases in All Other. 2 See notes A, B, C and D on slide 23 for definitions of Global Liquidity Sources, Liquidity Coverage Ratio, Time to Required Funding and Supplementary Leverage Ratio, respectively. 3 Regulatory capital and liquidity ratios at March 31, 2018 are preliminary. Bank of America reports regulatory capital ratios under both the Standardized and Advanced approaches. The approach that yields

the lower ratio is used to assess capital adequacy, which is the Advanced approaches for the periods presented. Transition provisions of Basel 3 are fully phased-in as of January 1, 2018. Prior periods are presented on a fully phased-in basis.

4 Represents a non-GAAP financial measure. For important presentation information, see slide 25.5 Berkshire Hathaway exercised its warrants to purchase 700 million shares of BAC common stock in 3Q17 using its Series T preferred shares, which resulted in an increase to common shares outstanding.

Average Loans and Deposits

____________________Notes: Amounts may not total due to rounding. GWIM defined as Global Wealth & Investment Management and GM defined as Global Markets.1 Includes $6B and $9B of average non-U.S. consumer credit card loans in 2Q17 and 1Q17, respectively. During 2Q17, the Company sold its non-U.S. consumer credit card business.

$914 $915 $918 $928 $932

$0

$250

$500

$750

$1,000

1Q17 2Q17 3Q17 4Q17 1Q18

YoY+2%

636 653 659 666 674

257 245 240 240 243

305 300 316 330 324

$1,257 $1,257 $1,272 $1,294 $1,297

$0

$350

$700

$1,050

$1,400

1Q17 2Q17 3Q17 4Q17 1Q18

Consumer Banking GWIM Global Banking Other (GM and All Other)

YoY+3%

+6%

(6%)

+6%

258 262 269 276 280

148 151 154 157 159

343 345 346 350 352

70 70 72 74 74$819 $827 $842 $857 $864

$0

$300

$600

$900

1Q17 2Q17 3Q17 4Q17 1Q18

Consumer Banking GWIM Global Banking Global Markets

YoY+5%

+8%

+7%

+3%

+5%

69 65 62 58 55

17 16 15 14 13

9 6

$95 $88$77 $71 $68

$0

$50

$100

$150

1Q17 2Q17 3Q17 4Q17 1Q18

Residential mortgage Home equity Non-U.S. credit card

YoY(29%)

Total Loans & Leases ($B) 1 Loans & Leases in All Other ($B) 1

Loans & Leases in Business Segments ($B)

6

Total Deposits ($B)

$934 $908 $900

$1,237

$911

0.42% 0.40% 0.39%0.53%

0.40%

0.0%

0.5%

1.0%

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

1Q17 2Q17 3Q17 4Q17 1Q18

Net charge-offs Net charge-off ratio

____________________1 Excludes loans measured at fair value.

Asset Quality

7

Net Charge-offs ($MM)

Provision for Credit Losses ($MM)

$835$726

$834$1,001

$834

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

1Q17 2Q17 3Q17 4Q17 1Q18

• Total net charge-offs of $0.9B declined $0.3B from 4Q17, and total net charge-off ratio improved to 40 bps

– Consumer net charge-offs of $0.8B increased $0.1B, driven by seasonally higher losses in credit card Net charge-off ratio remained low at 75 bps

– Commercial net charge-offs of $0.1B decreased $0.4B, primarily driven by the absence of a $0.3B single-name non-U.S. charge-off in 4Q17 Net charge-off ratio improved to 7 bps

• Provision expense of $0.8B decreased $0.2B from 4Q17

– Net reserve release of $0.1B in 1Q18 reflected improvements in consumer real estate and energy, partially offset by seasoning in the credit card portfolio

• Allowance for loan and lease losses of $10.3B, which represents 1.11% of total loans and leases 1

• Nonperforming loans (NPLs) decreased $0.1B from 4Q17

– Current consumer NPLs remained at 45%

• Commercial reservable criticized utilized exposure decreased $0.2B from 4Q17, driven by improvement in energy exposures

$107 $157 $169

$468

$810.10% 0.14% 0.14%

0.39%

0.07% 0.0%

0.5%

1.0%

1.5%

2.0%

$0

$250

$500

$750

$1,000

1Q17 2Q17 3Q17 4Q17 1Q18

C&I Small business and other Commercial NCO ratio

Asset Quality – Consumer and Commercial Portfolios

8

Consumer Net Charge-offs ($MM)

$827$751 $731 $769

$830

0.74% 0.67% 0.65% 0.68% 0.75%

0.0%

0.5%

1.0%

1.5%

2.0%

$0

$250

$500

$750

$1,000

1Q17 2Q17 3Q17 4Q17 1Q18

Credit card Other Consumer NCO ratio

____________________1 Excludes loans measured at fair value.2 Fully-insured loans are FHA-insured loans and other loans individually insured under long-term standby agreements.

Consumer Asset Quality Metrics ($MM)

Provision $748 $619 $772

Nonperforming loans and leases 4,906 5,166 5,546

% of loans and leases 1 1.10 % 1.14 % 1.23 %

Consumer 30+ days performing past due $7,823 $8,811 $9,451

Fully-insured 2 3,915 4,466 5,531

Non fully-insured 3,908 4,345 3,920

Allowance for loans and leases 5,250 5,383 6,136


# times annualized NCOs 1.56 x 1.76 x 1.83 x

1Q18 4Q17 1Q17

Commercial Net Charge-offs ($MM)

Commercial Asset Quality Metrics ($MM)

Provision $86 $382 $63

Reservable criticized utilized exposure 13,366 13,563 16,068

Nonperforming loans and leases 1,472 1,304 1,728


Allowance for loans and leases $5,010 $5,010 $5,218


1Q18 4Q17 1Q17

4Q17 included $0.3B single-name non-US

C&I charge-off

Net Interest Income

9

• Net interest income of $11.6B ($11.8B FTE 1)

– Increased $0.6B from 1Q17, reflecting the benefits from higher interest rates and loan and deposit growth, partially offset by a decline resulting from the sale of the non-U.S. consumer credit card business in 2Q17 and higher funding costs in Global Markets

– Increased $146MM from 4Q17, driven by higher interest rates, partially offset by two fewer interest accrual days

• Net interest yield of 2.39% was flat compared to 1Q17

– Reflects the benefits from spread improvement offset by a reduction in the non-U.S. consumer credit card portfolio (higher-yielding asset), as well as the impact from an increase in Global Markets assets (lower-yielding)

• Interest rate sensitivity as of March 31, 2018 2

– Remain positioned for NII to benefit as rates move higher

– +100bps parallel shift in interest rate yield curve is estimated to benefit NII by $3.0B over the next 12 months, driven primarily by sensitivity to short-end interest rates 2

____________________Note: FTE defined as fully taxable-equivalent basis. 1 Represents a non-GAAP financial measure. For important presentation information, see slide 25. 2 NII asset sensitivity represents banking book positions.

Net Interest Income (FTE, $B) 1

$11.1 $11.0 $11.2 $11.5 $11.6

$11.3 $11.2 $11.4 $11.7 $11.8

$0

$3

$6

$9

$12

1Q17 2Q17 3Q17 4Q17 1Q18

Net interest income (GAAP) FTE adjustment

2.39% 2.34% 2.36% 2.39% 2.39%

1%

2%

3%

1Q17 2Q17 3Q17 4Q17 1Q18

Net Interest Yield (FTE) 1

63% 61% 61%65%

60%

30%

40%

50%

60%

70%

1Q17 2Q17 3Q17 4Q17 1Q18

Expense and Efficiency

____________________Note: Amounts may not total due to rounding. Certain amounts have been reclassified to reflect new accounting pronouncements. See slide 25 for important presentation information.

• Total noninterest expense of $13.9B declined $0.2B, or 1%, from 1Q17, driven by lower non-personnel costs

• Efficiency ratio improved to 60% in 1Q18

• Total noninterest expense increased $0.6B from 4Q17, driven by seasonally elevated payroll tax costs of $0.4B and higher revenue-related incentives

• Total headcount was 208K, down 1% from 1Q17

– Growth of 1.6K in primary sales professionals across Consumer Banking, GWIM and Global Banking was more than offset by reductions from the sale of the non-U.S. consumer credit card business and declines in non-sales professionals

Total Noninterest Expense ($B)

10

8.5 8.0 7.8 7.6 8.5

5.6 5.9 5.6 5.7 5.4

$14.1 $14.0 $13.4 $13.3 $13.9

$0

$4

$8

$12

$16

1Q17 2Q17 3Q17 4Q17 1Q18

Personnel Non-personnel

Efficiency Ratio

Consumer Banking

11

____________________Note: ROAAC defined as return on average allocated capital1 FTE basis.2 Cost of deposits calculated as annualized noninterest expense as a percentage of total average deposits within the Deposits subsegment. 3 Includes portfolios in Consumer Banking and GWIM. 4 Represents the percentage of consumer checking accounts that are estimated to be the customer’s primary account based on multiple relationship factors (e.g., linked to their direct deposit).

• [ Bullets to come ]

• Net income of $2.7B and ROAAC of 30%

– Pretax income of $3.6B, up 19% from 1Q17

• Revenue of $9.0B increased $0.7B, or 9%, from 1Q17

– Strong NII growth, driven by higher interest rates and growth in deposits and loans

– Noninterest income increased as higher card income more than offset lower mortgage banking income

• Provision increased from 1Q17, primarily due to credit card portfolio seasoning and loan growth

– Net charge-offs increased $0.1B to $0.9B

• Noninterest expense up $0.1B, or 2%, from 1Q17, reflecting investments for business growth

– Efficiency ratio improved 364 bps to below 50%– Continued investment in primary sales professionals, financial

center builds/renovations and digital capabilities • Average deposits of $674B grew $39B, or 6%, from 1Q17

– 51% of deposits in checking accounts; 90% primary accounts 4

– Average cost of deposits of 1.61% 2

• Average loans and leases of $280B increased $22B, or 8%, from 1Q17, driven by growth in residential mortgage and credit card

• Client brokerage assets of $182B grew $28B, or 18%, from 1Q17, driven by record client flows and market performance

• Combined YoY growth in card spend accelerated to 9% (credit +11%, debit +8%) vs. 5% in the year-ago period

• Active mobile banking users of 24.8MM, up 12% from 1Q17, and mobile channel usage up 32% from 1Q17

$ in millions

Total revenue, net of interest expense 1 $9,032 $77 $748

Provision for credit losses 935 49 97

Noninterest expense 4,480 (27) 70

Pretax income 1 3,617 55 581

Income tax expense 1 922 (443) (222)

Net income $2,695 $498 $803

Key Indicators ($ in billions)

Average deposits $674.4 $665.5 $635.6

Rate paid on deposits 0.05 % 0.04 % 0.03 %

Cost of deposits 2 1.61 1.61 1.63

Average loans and leases $279.6 $275.7 $257.9

Net charge-off ratio 1.27 % 1.21 % 1.21 %

Client brokerage assets $182.1 $177.0 $153.8

Active mobile banking users (MM) 24.8 24.2 22.2

% Consumer sales through digital channels 26 % 24 % 22 %

Number of financial centers 4,435 4,470 4,559

Combined credit / debit purchase volumes 3 $137.4 $143.4 $125.9

Total U.S. consumer credit card risk-adjusted margin 3 8.32 % 8.74 % 8.89 %

Return on average allocated capital 30 24 21

Allocated capital $37 $37 $37

Efficiency ratio 1 50 % 50 % 53 %

Inc/(Dec)

1Q18 4Q17 1Q17

1Q18 4Q17 1Q17

Consumer Banking Trends

12

• #1 Consumer Deposit Market Share 1

• 2018 JD Power Certified Mobile App • #1 Online Banking and Mobile Banking

Functionality 2

• #1 Digital U.S. Credit Card Sales Functionality 3

• #1 Online Broker 4

• #1 Home Equity Lender and #2 bank for Retail Mortgage Originations 5

• #1 in Prime Auto Credit distribution of new originations among peers 6

• #2 Small Business Lender 7– 88% primary checking accounts

5.8 6.0 6.2 6.4 6.5

2.5 2.5 2.6 2.6 2.5

$8.3 $8.5 $8.8 $9.0 $9.0

$0

$2

$4

$6

$8

$10

1Q17 2Q17 3Q17 4Q17 1Q18

Net interest income Noninterest income

87 87 89 90 91

51 51 52 53 52

44 43 42 41 39

59 63 68 73 7718 19 19 19 19

$258 $262 $269 $276 $280

$0

$100

$200

$300

1Q17 2Q17 3Q17 4Q17 1Q18Consumer credit card Vehicle lendingHome equity Residential mortgageSmall business / other

Average Loans and Leases ($B)

$4.4 $4.4 $4.5 $4.5 $4.5

53% 52% 51% 50% 50%

40%

50%

60%

70%

$0

$1

$2

$3

$4

$5

1Q17 2Q17 3Q17 4Q17 1Q18

Noninterest expense Efficiency ratio

Total Expense ($B) and Efficiency 8Total Revenue ($B) 8

88

____________________Note: Amounts may not total due to rounding.1 Source: June 2017 FDIC deposit data. 2 Source: Dynatrace 4Q17 Online Banker Scorecard and Javelin 2017 Mobile Banking Scorecard. 3 Source: Forrester 2017 Credit Card Functionality. 4 Source: Kiplinger’s 2017 Best Online Brokers Review.

5 Source: Inside Mortgage Finance (YTD 3Q17 and YTD 4Q17). 6 Source: Experian. Largest percentage of 740+ Scorex customers among key competitors as of January 2018. 7 Source: FDIC (4Q17).8 FTE basis.

50% 50% 50% 50% 51%

$636 $653 $659 $666 $674

0.03% 0.04% 0.04% 0.04% 0.05%

0.00%

0.05%

0.10%

0.15%

0.20%

$0

$100

$200

$300

$400

$500

$600

$700

1Q17 2Q17 3Q17 4Q17 1Q18Other deposits CheckingRate paid (%)

Average Deposits ($B)

Business Leadership

$154 $159 $167 $177 $182

$0

$50

$100

$150

$200

1Q17 2Q17 3Q17 4Q17 1Q18

Client Brokerage Assets (EOP, $B)

4.9 7.6

12.4

28.6

$1$2

$4

$9

$0

$2

$4

$6

$8

$10

0

5

10

15

20

25

30

1Q15 1Q16 1Q17 1Q18Transactions (MM) Volume ($B)

Zelle integrated into BAC mobile

app in 2017

267 286 314 365

305 307 308 316

$572 $592 $622$682

$0

$200

$400

$600

$800

1Q15 1Q16 1Q17 1Q18Digital Non-Digital

Consumer Banking Digital Trends

13

____________________1 Digital users represent mobile and / or online users in consumer businesses.2 Includes person-to-person payments sent and / or received through e-mail or mobile identification.3 Represents the total number of application logins using a smartphone or tablet. Digital appointments represent the number of appointments made using a smartphone or tablet.

30.7 32.0 33.7 35.5

17.119.6

22.224.8

0

10

20

30

40

1Q15 1Q16 1Q17 1Q18

Digital banking users Mobile banking users

Active Digital Banking Users (MM) 1

13%16%

20%

24%

0%

5%

10%

15%

20%

25%

30%

1Q15 1Q16 1Q17 1Q18

CAGR

6%

1%

11%

% Mobile Deposit Transactions

Person-to-Person Payments (Zelle) 2Total Payments ($B)

632

8911,048

1,381

86

263

355

445

0

100

200

300

400

500

600

700

0

200

400

600

800

1,000

1,200

1,400

1,600

1Q15 1Q16 1Q17 1Q18Mobile Channel Usage Digital Appointments (000's)

Mobile Channel Usage (MM) 3

16%19%

22%

26%

0%

10%

20%

30%

1Q15 1Q16 1Q17 1Q18

% Digital Sales

Global Wealth & Investment Management

14

____________________1 FTE basis.2 Includes financial advisors in Consumer Banking of 2,538 and 2,121 in 1Q18 and 1Q17.


– Record pretax income of $1.4B, up 12% from 1Q17, and pretax margin of 29%

• Revenue increased to a record $4.9B, up 6% from 1Q17, reflecting higher asset management fees and NII, partially offset by lower transactional revenue

– 85% of revenue from asset management fees and NII vs. 81% in 1Q17

• Noninterest expense increased 3% from 1Q17, primarily due to higher revenue-related incentive costs

• Client balances grew 5% from 1Q17 to $2.7T, driven by higher market valuations and strong net flows

– Assets under management (AUM) flows of $24B in 1Q18, reflected solid client activity and, to a lesser extent than the year-ago period, a shift from brokerage to AUM

• Average deposits of $243B declined 6% from 1Q17, primarily due to clients shifting balances into investments during 1H17

– Growth of $3B, or 1%, compared to 4Q17

• Average loans and leases of $159B increased $11B, or 7%, from 1Q17, driven by mortgage and structured lending; 32nd

consecutive quarter of loan growth

• Wealth advisors grew 4% from 1Q17 to 19,276 2

– Record low competitive attrition rate

$ in millions

Total revenue, net of interest expense 1 $4,856 $173 $264

Provision for credit losses 38 32 15

Noninterest expense 3,428 (45) 99

Pretax income 1 1,390 186 150


Net income $1,035 $293 $262



Average loans and leases 159.1 157.1 148.4


AUM flows $24.2 $18.2 $29.2

Pretax margin 29 % 26 % 27 %

Return on average allocated capital 29 21 22 Allocated capital $14.5 $14.0 $14.0

Inc/(Dec)

1Q18 4Q17 1Q17

1Q18 4Q17 1Q17

Global Wealth & Investment Management Trends

15

Business Leadership Average Loans and Leases ($B) Average Deposits ($B)

• #1 U.S. wealth management market position across client assets, deposits and loans 1

• #1 in personal trust assets under management 2

• #1 in Barron’s U.S. high net worth client assets (2017)

• #1 in Barron’s Top 1,200 ranked Financial Advisors (2018)

• #1 in Forbes’ Top 500 America’s Top Next Generation Advisors (2017)

• #1 in Financial Times Top 401K Retirement Plan Advisers (2017)

• #2 in Barron’s Top 100 Women Advisors (2017)

1,232 1,233 1,244 1,262 1,237

947 991 1,036 1,081 1,085

255 237 238 247 242152 156 159 162 162$2,585 $2,617 $2,676 $2,752 $2,725

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

1Q17 2Q17 3Q17 4Q17 1Q18

Brokerage / Other Assets under management Deposits Loans and leases

Client Balances (EOP, $B) 4

71 72 74 75 77

43 43 42 42 42

32 33 35 36 383 3 3 3 3$148 $151 $154 $157 $159

$0

$60

$120

$180

1Q17 2Q17 3Q17 4Q17 1Q18

Consumer real estate Securities-based lendingStructured lending Credit card / Other

____________________Note: Amounts may not total due to rounding.1 Source: U.S.-based full-service wirehouse peers based on 4Q17 earnings releases.2 Source: Industry 4Q17 call reports. 3 FTE basis.4 Loans and leases include margin receivables which are classified in customer and other receivables on the consolidated balance sheet.

1.6 1.6 1.5 1.5 1.6

2.2 2.3 2.3 2.4 2.5

0.9 0.8 0.8 0.7 0.7$4.6 $4.7 $4.6 $4.7 $4.9

$0

$1

$2

$3

$4

$5

1Q17 2Q17 3Q17 4Q17 1Q18

Net interest income Asset management fees Brokerage / Other

Total Revenue ($B) 3

$257 $245 $240 $240 $243

$0

$50

$100

$150

$200

$250

$300

1Q17 2Q17 3Q17 4Q17 1Q18

3

Global Banking

16

____________________1 FTE basis.2 Global Banking and Global Markets share in certain deal economics from investment banking, loan origination activities and sales and trading activities.



– Pretax income of $2.7B, down 2% from 1Q17

• Revenue of $4.9B decreased modestly from 1Q17

– Reflects lower investment banking fees and the impact of tax reform on certain tax-advantaged investments, partially offset by the benefit from higher interest rates and growth in loans and deposits

• Total Corporation investment banking fees of $1.4B (excl. self-led) declined 15% from a strong 1Q17 performance

• Noninterest expense increased 1% from 1Q17, driven by higher personnel expense

– Added additional client-facing professionals to further strengthen local market coverage

– Efficiency ratio remained low at 44%

• Average loans and leases of $352B increased 3% from 1Q17, primarily driven by growth in international and domestic C&I

• Average deposits of $324B grew 6% from 1Q17

$ in millions

Total revenue, net of interest expense 1, 2 $4,934 ($85) ($21)

Provision for credit losses 16 (116) (1)

Noninterest expense 2,195 34 32

Pretax income 1 2,723 (3) (52)


Net income $2,016 $336 $287

Selected Revenue Items ($ in millions)

Total Corporation IB fees (excl. self-led) 2 $1,353 $1,418 $1,584

Global Banking IB fees 2 744 811 925

Business Lending revenue 2,124 2,262 2,247

Global Transaction Services revenue 1,930 1,876 1,701





Return on average allocated capital 20 17 18

Allocated capital $41 $40 $40


Inc/(Dec)

4Q17 1Q171Q18

1Q18 4Q17 1Q17

1Q18 4Q17 1Q17

Global Banking Trends

17

____________________Note: Amounts may not total due to rounding.1 Global Banking and Global Markets share in certain deal economics from investment banking, loan origination activities and sales and trading activities.2 FTE basis.3 Advisory includes fees on debt and equity advisory and mergers and acquisitions.

77% 74% 70% 68% 65%

23% 26% 30% 32% 35%$305 $300 $316 $330 $324

$0

$100

$200

$300

$400

1Q17 2Q17 3Q17 4Q17 1Q18

Noninterest-bearing Interest-bearing

926 901 962 846 827

312 231 193 204 314

405 483 374 429 296

(59) (83) (52) (61) (84)

$1,584 $1,532 $1,477 $1,418 $1,353

1Q17 2Q17 3Q17 4Q17 1Q18

Debt Equity Advisory Self-led deals

Total Corporation IB Fees ($MM) 1

• World’s Best Bank for Advisory and North America’s Best Bank for Small to Medium-sized Enterprises(Euromoney, ’17)

• Most Innovative Investment Bank of the Year and Best Bank for Global Payments (The Banker, ’17)

• Best Global Debt Bank (Global Finance, ’18)• 2017 Share and Quality Leader in U.S. Large Corporate

Banking & U.S. Cash Management (Greenwich)• Best Brand for Overall Middle Market Banking and

Excellence Award for International Middle Market Banking - Payments, FX, Trade Finance (Greenwich, ’17)

• Relationships with 79% of the Global Fortune 500; 95% of the U.S. Fortune 1,000 (2017)

2.6 2.5 2.6 2.7 2.6

0.9 0.9 0.8 0.8 0.7

0.8 0.8 0.8 0.8 0.80.7 0.8 0.8 0.7 0.8

$5.0 $5.0 $5.0 $5.0 $4.9

$0

$2

$4

$6

1Q17 2Q17 3Q17 4Q17 1Q18

Net interest income IB fees Service charges All other income

Total Revenue ($B) 1, 2

3

170 171 169 171 172

155 157 159 162 162

18 18 18 17 17$343 $345 $346 $350 $352

$0

$100

$200

$300

$400

1Q17 2Q17 3Q17 4Q17 1Q18

Commercial Corporate Business Banking

2

Average Deposits ($B) Business Leadership Average Loans and Leases ($B)

Global Markets

18


____________________1 FTE basis.2 Global Banking and Global Markets share in certain deal economics from investment banking, loan origination activities and sales and trading activities.3 Represents a non-GAAP financial measure; see note E on slide 23.4 See note F on slide 23 for definition of VaR.


– Pretax income of $2.0B was stable compared to 1Q17

• Revenue grew 2% from 1Q17, driven by sales and trading revenue

• Sales and trading revenue of $4.1B increased 6% from 1Q17, with FICC down 7% to $2.6B and Equities up 38% to $1.5B

• Excluding net DVA, sales and trading revenue of $4.1B increased 1% from 1Q17 3

– FICC revenue of $2.5B declined 13% from a strong 1Q17, due to lower activity and less favorable market conditions in credit-related products, partially offset by improved activity in rates and currencies

– Record Equities revenue of $1.5B increased 38% from 1Q17, driven by increased client activity and a strong trading performance in derivatives

• Noninterest expense increased 2% versus 1Q17, driven by continued investments in technology

• Average total assets increased from 1Q17, primarily due to targeted growth in both Equities and FICC

• Average VaR remained low at $40MM in 1Q18 4

• No trading loss days recorded in any of the periods presented

$ in millions

Total revenue, net of interest expense 1, 2 $4,786 $1,390 $78

Net DVA 64 182 194

Total revenue (excl. net DVA) 1, 2, 3 4,722 1,208 (116)

Provision for credit losses (3) (165) 14

Noninterest expense 2,818 204 61

Pretax income 1 1,971 1,351 3

Income tax expense 1 513 303 (158)

Net income $1,458 $1,048 $161

Net income (excl. net DVA) 3 $1,409 $926 $31

Selected Revenue Items ($ in millions) 2

Sales and trading revenue $4,117 $2,539 $3,899

Sales and trading revenue (excl. net DVA) 3 4,053 2,657 4,029

FICC (excl. net DVA) 2,536 1,709 2,930

Equities (excl. net DVA) 1,517 948 1,099

Global Markets IB fees 609 597 666


Average total assets $678.4 $659.4 $607.0

Average trading-related assets 463.2 449.7 422.4

Average 99% VaR ($ in MM) 4 40 36 38


Return on average allocated capital 17 % 5 % 15 %Allocated capital $35 $35 $35


Inc/(Dec)

1Q18 4Q17 1Q17

1Q18 4Q17 1Q17

1Q18 4Q17 1Q17

Global Markets Trends and Revenue Mix

19

2.32.9 2.5

1.01.1 1.5

$3.3$4.0 $4.1

$0

$1

$2

$3

$4

$5

1Q16 1Q17 1Q18

FICC Equities

$408 $422$463

$42 $38 $40

$0

$25

$50

$75

$100

$0

$100

$200

$300

$400

$500

1Q16 1Q17 1Q18

Avg. trading-related assets Avg. VaR

• Best Bank for Markets in Asia (Euromoney, 2017)• European Trading House of the Year (Financial

News, 2017)• Equity Derivatives House of the Year (Risk

Magazine, 2017)• #1 Equity Portfolio Trading Share – North

American Institutions (Greenwich, 2017)• 2017 U.S. Fixed Income Quality Leader in Credit

and Securitized Products (Greenwich, 2017) • 2017 Quality Leader in Global Top-Tier Foreign

Exchange Service and Sales (Greenwich, 2017) • #2 Global Research Firm (Institutional Investor,

2017)

____________________Note: Amounts may not total due to rounding.1 Represents a non-GAAP financial measure. Reported sales & trading revenue was $4.1B, $3.9B and $3.4B for 1Q18, 1Q17 and 1Q16, respectively. Reported FICC sales & trading revenue was $2.6B, $2.8B and $2.4B for 1Q18, 1Q17 and

1Q16, respectively. Reported Equities sales & trading revenue was $1.5B, $1.1B and $1.0B for 1Q18, 1Q17 and 1Q16, respectively. See note E on slide 23.2 Macro includes G10 FX, rates and commodities products.3 See note F on slide 23 for definition of VaR.

58%42%

Credit / other Macro

61%

39%

U.S. / Canada International

1Q18 Total FICC S&T Revenue Mix(excl. net DVA) 1

1Q18 Global Markets Revenue Mix(excl. net DVA) 1

2

Total Sales & Trading Revenue (excl. net DVA) ($B) 1 Average Trading-related Assets ($B) and VaR ($MM) 3

Business Leadership

• Net loss of $0.3B in 1Q18

• Revenue declined $0.2B from 1Q17, primarily due to the absence of the non-U.S. consumer credit card business sold in 2Q17

– Improvement from 4Q17, driven largely by the absence of a $0.9B charge related to the Tax Act

• Provision improved from 1Q17, primarily driven by continued runoff of the non-core portfolio

• Noninterest expense improved $0.5B from 1Q17, due to lower litigation expense, reduced operational costs from the sale of the non-U.S. consumer credit card business and lower non-core mortgage costs

• 1Q18 and 1Q17 included a $0.2B tax benefit related to stock-based compensation

• Tax expense in 4Q17 included the negative impact associated with the Tax Act

____________________1 All Other consists of ALM activities, equity investments, non-core mortgage loans and servicing activities, the net impact of periodic revisions to the MSR valuation model for both core and non-core

MSRs and the related economic hedge results, liquidating businesses and residual expense allocations. ALM activities encompass certain residential mortgages, debt securities, interest rate and foreign currency risk management activities, the impact of certain allocation methodologies and hedge ineffectiveness. The results of certain ALM activities are allocated to our business segments. Equity investments include our merchant services joint venture, as well as a portfolio of equity, real estate and other alternative investments. During 2Q17, the Company sold its non-U.S. consumer credit card business.

2 FTE basis.

All Other 1

20

$ in millions

Total revenue, net of interest expense 2 ($333) $1,033 ($239)

Provision (benefit) for credit losses (152) 33 (126)

Noninterest expense 976 457 (458)

Pretax income (loss) 2 (1,157) 543 345

Income tax expense (benefit) 2 (871) (1,835) 277

Net income (loss) ($286) $2,378 $68

Inc/(Dec)

4Q17 1Q171Q18

First Quarter 2018 Key Takeaways

21

• Produced solid returns

• Delivered responsible growth

• Solid client activity with good deposit, loan and AUM growth

• Maintained positive operating leverage

• Asset quality remained strong

• Increased capital returned to shareholders; repurchased $4.9B of common shares and paid $1.2B in common dividends

• Positioned to benefit from higher interest rates and an improving economic environment

Appendix

Notes

23

A Global Liquidity Sources (GLS) include cash and high-quality, liquid, unencumbered securities, limited to U.S. government securities, U.S. agency securities, U.S. agency MBS, and a select group of non-U.S. government and supranational securities, and are readily available to meet funding requirements as they arise. It does not include Federal Reserve Discount Window or Federal Home Loan Bank borrowing capacity. Transfers of liquidity among legal entities may be subject to certain regulatory and other restrictions.

B The Liquidity Coverage Ratio (LCR) represents the consolidated average amount of high-quality liquid assets as a percent of the prescribed average net cash outflows over a 30 calendar-day period of significant liquidity stress, under the U.S. LCR final rule.

C Time to Required Funding (TTF) is a debt coverage measure and is expressed as the number of months unsecured holding company obligations of Bank of America Corporation can be met using only the Global Liquidity Sources held at the BAC parent company and NB Holdings without the BAC parent company issuing debt or sourcing additional liquidity. We define unsecured contractual obligations for purposes of this metric as maturities of senior or subordinated debt issued or guaranteed by Bank of America Corporation.

D The numerator of the SLR is quarter-end Basel 3 Tier 1 capital. The denominator is total leverage exposure based on the daily average of the sum of on-balance sheet exposures less permitted Tier 1 deductions, as well as the simple average of certain off-balance sheet exposures, as of the end of each month in a quarter. Off-balance sheet exposures primarily include undrawn lending commitments, letters of credit, potential future derivative exposures and repo-style transactions. SLR requirements became effective on January 1, 2018.

E Revenue for all periods included net debit valuation adjustments (DVA) on derivatives, as well as amortization of own credit portion of purchase discount and realized DVA on structured liabilities.Net DVA gains (losses) were $64MM, ($118MM), ($130MM) and $154MM for 1Q18, 4Q17, 1Q17 and 1Q16, respectively. Net DVA gains (losses) included in FICC revenue were $78MM, ($112MM), ($120MM) and $140MM for 1Q18, 4Q17, 1Q17 and 1Q16, respectively. Net DVA gains (losses) included in Equities revenue were ($14MM), ($6MM), ($10MM) and $14MM for 1Q18, 4Q17, 1Q17 and 1Q16, respectively.

F VaR model uses historical simulation approach based on three years of historical data and an expected shortfall methodology equivalent to a 99% confidence level. Using a 95% confidence level, average VaR was $21MM, $17MM and $21MM for 1Q18, 4Q17 and 1Q17 respectively.

Forward-Looking Statements

24

Bank of America Corporation (the “Company”) and its management may make certain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as “anticipates,” “targets,” “expects,” “hopes,” “estimates,” “intends,” “plans,” “goals,” “believes,” “continue” and other similar expressions or future or conditional verbs such as “will,” “may,” “might,” “should,” “would” and “could.” Forward-looking statements represent the Company's current expectations, plans or forecasts of its future results, revenues, expenses, efficiency ratio, capital measures, strategy and future business and economic conditions more generally, and other future matters. These statements are not guarantees of future results or performance and involve certain known and unknown risks, uncertainties and assumptions that are difficult to predict and are often beyond the Company's control. Actual outcomes and results may differ materially from those expressed in, or implied by, any of these forward-looking statements.

You should not place undue reliance on any forward-looking statement and should consider the following uncertainties and risks, as well as the risks and uncertainties more fully discussed under Item 1A. Risk Factors of the Company's 2017 Annual Report on Form 10-K and in any of the Company's subsequent Securities and Exchange Commission filings: the Company's potential claims, damages, penalties, fines and reputational damage resulting from pending or future litigation, regulatory proceedings and enforcement actions, including inquiries into our retail sales practices, and the possibility that amounts may be in excess of the Company’s recorded liability and estimated range of possible loss for litigation exposures; the possibility that the Company could face increased servicing, securities, fraud, indemnity, contribution or other claims from one or more counterparties, including trustees, purchasers of loans, underwriters, issuers, other parties involved in securitizations, monolines or private-label and other investors; the possibility that future representations and warranties losses may occur inexcess of the Company's recorded liability and estimated range of possible loss for its representations and warranties exposures; the Company’s ability to resolve representations and warranties repurchase and related claims, including claims brought by investors or trustees seeking to avoid the statute of limitations for repurchase claims; uncertainties about the financial stability and growth rates of non-U.S. jurisdictions, the risk that those jurisdictions may face difficulties servicing their sovereign debt, and related stresses on financial markets, currencies and trade, and the Company's exposures to such risks, including direct, indirect andoperational; the impact of U.S. and global interest rates, currency exchange rates, economic conditions, trade policies, and potential geopolitical instability; the impact on the Company’s business, financial condition and results of operations of a potential higher interest rate environment; the possibility that future credit losses may be higher than currently expected due to changes in economic assumptions, customer behavior, adverse developments with respect to U.S. or global economic conditions and other uncertainties; the Company’s ability to achieve its expense targets, net interest income expectations, or other projections; adverse changes to the Company's credit ratings from the major credit rating agencies; estimates of the fair value of certain of the Company's assets and liabilities; uncertainty regarding the content, timing and impact of regulatory capital and liquidity requirements; the potential impact of total loss-absorbing capacity requirements; potential adverse changes to our global systemically important bank surcharge; the potential impact of Federal Reserve actions on the Company's capital plans; the possible impact of the Company's failure to remediate the shortcoming identified by banking regulators in the Company's Resolution Plan; the effect of regulations, other guidance or additional information on our estimated impact of the Tax Act; the impact of implementation and compliance with U.S. and international laws, regulations and regulatory interpretations, including, but not limited to, recovery and resolution planning requirements, Federal Deposit Insurance Corporation (FDIC) assessments, the Volcker Rule, fiduciary standards and derivatives regulations; a failure in or breach of the Company's operational or security systems or infrastructure, or those of third parties, including as a result of cyber attacks; the impact on the Company's business, financial condition and results of operations from the planned exit of the United Kingdom from the European Union; and other similar matters.

• The information contained herein is preliminary and based on Company data available at the time of the earnings presentation. It speaks only as of the particular date or dates included in the accompanying slides. Bank of America does not undertake an obligation to, and disclaims any duty to, update any of the information provided.

• Effective January 1, 2018, the Company adopted new accounting standards, among which are:– Tax effects in accumulated other comprehensive income (OCI), which addresses certain tax effects in accumulated OCI related to the Tax Cuts and Jobs Act. In

connection with the adoption, the Company reclassified $1.3 billion from accumulated OCI to retained earnings;– Hedge accounting, which simplifies and expands the ability to apply hedge accounting to certain risk management activities. This standard does not have a

material impact on the Company’s Consolidated Financial Statements;– Presentation of pension costs, which requires separate presentation of the service cost component of pension expense from all other components of net

pension benefit/cost. This standard requires restatement of all prior periods in the Consolidated Statement of Income and is not material to any period presented; and

– Revenue from contracts with customers, which addresses the recognition of revenue for certain contracts with customers. This standard does not have a material impact on the Company’s Consolidated Financial Statements.

• The Company also reclassified prior periods in the Consolidated Statement of Income to include mortgage banking income and gains on sales of debt securities in other income, and in the Consolidated Balance Sheet to include mortgage servicing rights in other assets.

• The Company may present certain key performance indicators and ratios excluding certain items (e.g., DVA) which result in non-GAAP financial measures. The Company believes the use of these non-GAAP financial measures provides additional clarity in understanding its results of operations and trends. For more information about the non-GAAP financial measures contained herein, please see the presentation of the most directly comparable financial measures calculated in accordance with GAAP and accompanying reconciliations in the earnings press release for the quarter ended March 31, 2018 and other earnings-related information available through the Bank of America Investor Relations website at: http://investor.bankofamerica.com.

• The Company views net interest income and related ratios and analyses on a fully taxable-equivalent (FTE) basis, which when presented on a consolidated basis are non-GAAP financial measures. The Company believes managing the business with net interest income on an FTE basis provides investors with a more accurate picture of the interest margin for comparative purposes. The Company believes that the presentation allows for comparison of amounts from both taxable and tax-exempt sources and is consistent with industry practices. The FTE adjustment was $150MM, $251MM, $240MM, $237MM and $197MM for 1Q18, 4Q17, 3Q17, 2Q17 and 1Q17 respectively.

• The Company allocates capital to its business segments using a methodology that considers the effect of regulatory capital requirements in addition to internal risk-based capital models. The Company's internal risk-based capital models use a risk-adjusted methodology incorporating each segment's credit, market, interest rate, business and operational risk components. Allocated capital is reviewed periodically and refinements are made based on multiple considerations that include, but are not limited to, risk-weighted assets measured under Basel 3 Standardized and Advanced approaches, business segment exposures and risk profile and strategic plans. As a result of this process, in the first quarter of 2018, the Company adjusted the amount of capital being allocated to its business segments.

Important Presentation Information

25

http://investor.bankofamerica.com/

bank of america 1q18 financial results · – record net income of $6.9b and diluted earnings per...

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